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Proposed legislation's potential impacts on EB-5 compliance

Bipartisan leadership in the Senate Judiciary recently introduced S.1501, a bill which would reauthorize and overhaul the EB-5 program for another five years.

As with any piece of legislation, reactions to the bill vary, but the EB-5 industry embraces regulations that will improve security and transparency for all stakeholders and promote the integrity of the program overall.

Changes to Regional Center filings, Project approval, and processing:

By making exemplar filings and project pre-approval mandatory for Regional Centers, new regulations would improve investor confidence and help assure projects have the right plan to ensure success.

However, the proposed changes to job creation requirements will require the right EB-5 solutions. As the process potentially grows more complex, it will be essential to manage document tracking and reporting requirements for both the financialand immigrationcomponents of these offerings.

Increased reporting and oversight:

Annual reporting requirements for EB-5 issuers would increase substantially compared to current I-924A requirements. This would include annual certifications of compliance with state and US securities laws, registration with other agencies like the SEC, and background checks on Regional Center operators and those associated with Regional Centers.

Proposed regulations would also increase scrutiny on the source of investor funds. Gifted funds will only be allowed from immediate family members or grandparents, loans would need to be secured by the investor’s own assets and issued by licensed or regulated financial institutions, and the source of funds for both the capital contributions and any administrative fees must be proven as legitimate. As a result, projects will be required to track even more documentation to maintain compliance.

How can these changes benefit the EB-5 program as a whole?

Increasing the minimum investment has met little resistance. In fact, it could increase the program’s economic and job creation benefits substantially. The additional regulations would help investors, U.S. citizens, and businesses to be confident in the EB-5 program’s legitimacy and could help to secure its continued use.

If passed, the bill would attempt to reduce USCIS processing times: at present, USCIS’ published adjudication times for each petition in the process average 9-14 months. As a result, the duration of this immigration process extends far beyond what most would consider reasonable.

Under the proposed legislation, processing times would be capped at 120 days for exemplar filings, 150 days for I-526 petitions, and 190 days for the I-829 removal of conditions. In addition, certain petitions could be filed concurrently, making EB-5 a more practical source of funding for many developers. Consistent and predictable approval timeframes will enable issuers and developers to better plan when funds will be available and reduce risk in the EB-5 process, substantially benefiting all stakeholders.

Even if the provisions put forth in S. 1501 do not ultimately become law, it’s clear that Democrats and Republicans alike are serious about EB-5 compliance and oversight. As regulatory demands on the EB-5 program increase, a proactive approach to compliancewill be more important than ever.